Pound Sterling to Dollar Forecast: GDP Miss Sparks Fresh GBP Sell-Off

Modified: Sunday, 15 March 2026 21:01 BST - Written by David Woodsmith

STORY LINK Pound Sterling to Dollar Forecast: GDP Miss Sparks Fresh GBP Sell-Off

The Pound to Dollar exchange rate (GBP/USD) slipped back towards three-month lows near 1.3250 on Friday as recession concerns and rising energy prices weighed heavily on Sterling.

Weak UK GDP data intensified fears that the economy may struggle to withstand the latest oil shock, while safe-haven demand and firmer crude prices continued to underpin the US dollar.

GBP/USD Forecasts: Near 3-Month Lows

The Pound to Dollar (GBP/USD) exchange rate was subjected to renewed selling on Friday with a slide to just above 1.3250 and close to 3-month lows.

Risk appetite dipped amid fears over a prolonged increase in energy prices which helped underpin the dollar while the Pound was hit by weaker than expected GDP data with the risk that recession chatter will intensify.

A break of 1.3250 would risk a further decline to the 1.3200 area. An easing of Middle East fears and retreat in energy prices will be needed for a short-term GBP/USD rebound.

UK GDP was unchanged for January compared with consensus forecasts of a 0.2% increase and followed a 0.1% gain for December. There was no growth in the dominant services sector while a 0.2% increase in construction output was offset by a 0.1% retreat in industrial production.

RSM chief economist Thomas Pugh, commented; “Zero growth in January highlights just how little momentum the economy had coming into the energy crisis. That makes it more likely that growth will dip sharply below 1% this year, even if there is a swift resolution to the crisis.”

Tomasz Wieladek, chief European macro economist at T. Rowe Price was downbeat on the outlook; “The UK has been one of the weakest advanced economies in terms of recent growth performance. Therefore, the current oil price shock will most likely not just lead to inflation, but also push the UK economy into recession, raising unemployment and reducing GDP. Stagflation is just around the corner.”

Given fears over higher inflation, markets are now pricing in over an 80% chance that the Bank of England will raise rates by 25 basis points by the end of 2026.

ING noted difficulties for the Bank of England; “Don't rule out UK growth picking up through the first quarter, despite a weak January. But the energy price spike risks a longer period of stagnation through 2026, as inflation rises, the jobs market keeps cooling and real wages fall back. We think the bar for a Bank of England rate hike is high.”

The dollar posted a further advance in global markets amid defensive demand due to the on-going Middle East crisis. Brent crude is trading close to $100 p/b, while equities have lost ground. The US has temporarily lifted oil sanctions on Russia.

Commerzbank forex strategist Volkmar Baur commented; "These statements now sound more like attempts to somehow lower the oil price again, to which the market seems to be responding less and less."

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TAGS: Pound Dollar Forecasts